SINGAPORE, March 27, 2017 – China, in the past couple of years, has overtaken Singapore to be Malaysia’s largest real estate investor. From 2014-16, Chinese companies, mainly developers, invested an estimated S$2.6 billion across the causeway, compared to Singapore’s S$1.6 billion. At the height of Iskandar’s development boom in 2013, the Chinese committed about S$2.7 billion.
Sigrid Zialcita, Managing Director, Asia Pacific Research at Cushman & Wakefield says, “Boosted by its proximity to Singapore, development opportunities in Iskandar have been a favoured destination for Chinese capital in the emerging market space. In the last three years, Chinese investors also accounted for 46% of real estate investments in the country and were involved in some of the largest land transactions in the country.”
While the variety of options in a globalized real estate market as well as a desire to diversify could have shifted Singapore investments, there is no denying that this is similar to what has been seen around the world – Chinese capital is shaking up the marketplace. However, since last year, there has been a notable shift of Chinese investments into economic projects that will deliver longer term benefits to the Malaysian economy.”
China Railway, with Johor-based Iskandar Waterfront Holdings, jointly acquired a 60% stake in the Bandar Malaysia project from state-owned firm 1MDB for S$2.3 billion in one of the country’s largest land transactions. Touted to be the world’s largest underground city, the project encompasses residential and commercial complexes and will serve as Kuala Lumpur's gateway for the high speed rail-line to Singapore. It will also house the company’s regional headquarters.
“Significant investments from Chinese companies have filled a crucial link in fuelling Malaysia’s economic vision,” said Miss Zialcita.
Besides China Railway, a number of Chinese MNCs will also base their regional operations in Malaysia. Huawei Technologies late last year opened its regional headquarters in the Malaysian capital to take advantage of Malaysia’s digital economy push. E-commerce giant Alibaba Group has also reportedly planned to set up a regional distribution hub within KLIA Aeropolis as well as a logistic centre in Iskandar to cater to its fast-growing business in the region.
“The Malaysian government, since 2010, has unveiled several economic initiatives to propel the country up the income ladder. These ongoing projects will continue to lend viability to future plans as it develops critical infrastructure and foster commercial activities. We expect real estate values to benefit from the government’s sustained efforts to raise the level of economic development and income in the country,” said Miss Zialcita.
The Malaysia Vision Valley project in the neighbouring state of Negeri Sembilan, for example, gained traction with the recent signing of the Kuala Lumpur-Singapore High Speed Rail, which will have a designated stop there. Expected to be launched by the first quarter of 2017, Vision Valley is estimated to generate investments of more than S$132.0 billion by 2045 and extend the economic dynamism of Klang Valley.
Such projects are expected to structurally change the economy and lead to better quality jobs. The resultant higher incomes as well as inward migration will benefit residential investments in and around the capital as well as other regional urban centres.
“Malaysia looks to have weathered a particularly trying period and we are optimistic that any economic risks could recede from this point, with potential for the economy to start gaining momentum. There remains a case for investing in the country’s real estate and the current weakness in its currency provides an attractive entry proposition. While much of these projects will only deliver its benefits in the longer term, it does give property investors something to think about”, said Miss Zialcita
Source: Real Capital Analytics, Cushman & Wakefield
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Foo Chek Yee
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